It may come as a surprise, but privacy coins such as Monero or PIVX can be used as collateral to attain a crypto loan. Privacy coins are a controversial part of the industry, to say the least. With governments shunning them, and many crypto exchanges delisting them, people are often left assuming that their privacy coins are unaccepted everywhere. But this is simply not true.
What exactly are privacy coins?
Privacy coins are cryptocurrencies which hide the activity happening on their distributed ledgers. Unlike with other cryptocurrencies, where anybody can take a peek into somebody else’s financial activity, privacy coins limit who can see what activity. For instance, if you send money via Monero to somebody else, then only you and the other person are given knowledge of this trade. Additionally, nobody can see the contents of your wallet.
Most cryptocurrencies have some elements of anonymity, such as not having your name attached to your wallet, but with enough outside information other people can still figure out which wallets are attached to which people. This is because most cryptocurrencies (such as Bitcoin and Ethereum) are actually pseudonymous, which means that they substitute your name for something else, or more specifically, they substitute your name for your public key.
The legal status of privacy coins
Governments around the world have shown disdain for privacy coins in the past, however, it is still legal to own and use privacy coins in practically all Western countries. While many public bodies are uncomfortable with their existence, they also understand that this technology is directly bound to our basic human rights. Namely, the UN’s Declaration of Human Rights Article 12:
“No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honour and reputation. Everyone has the right to the protection of the law against such interference or attacks.”
To ban or prohibit the use of privacy coins would be to arbitrarily interfere with the privacy of a nation’s people. This means that coins such as Monero are unlikely to go anywhere anytime soon.
Privacy coins and loans
Most privacy coins run on their own independent blockchains, which means that DeFi lenders will not accept them as most of them run on the Ethereum network. However, there are CeFi loan providers that very much accept privacy coins as collateral. If a CeFi lender does not advertise their acceptance of privacy coins, it is worth directly asking them, as there is a good chance they are still open to it. Using privacy coins for collateral is not too different from using other cryptocurrencies, with the one exception that only you and the lender can see your collateral transaction. Additionally, most privacy coins can be held in cold storage, which is the standard protocol for CeFi lenders to do when they use your money as collateral.
https://heliolending.com/2021/06/10/using-privacy-coins-as-collateral/
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